Amazon

October 24, 2009

It appears to be official that Amazon isn't going to be adding wine to the long list of things you can buy from them.

There will be lots of speculation as to why, but it all boils down to this: they couldn't figure out a way to make it work as a business. In other words, profitable or not, there wasn't enough return in it for Amazon, relative to other choices for deploying their resources. Given that Amazon makes its living optimizing the supply/delivery chain, this is not good news for others who think it's just a matter of a warehouse and some software to keep track of all the details.

I think Amazon probably started out by looking at doing it themselves. At some point, they realized that a significant investment (and startup risk) was associated with that course of action.

So, they looked for someone who appeared to have a working system. By all accounts, New Vine Logistics (NVL) was the team to beat, so they started talking to them about a partnership.

It's useful to remember that NVL already had the "sunk cost" advantage when they acquired the shipping technology of the original wine.com. It's hard to imagine anyone building an equivalent operation cheaper.

But, it's pretty clear in hindsight that NVL wasn't making money on their existing clients, leading to the sudden closing of their doors and subsequent sale to Inertia Beverage Group. When Amazon Wine seemed about to open for business in late 2008, I suspect that the impending launch showed Amazon that their chosen partner didn't really have the resources to scale up. Chicken and egg? Perhaps. NVL needed a commitment from Amazon to get additional capital, and Amazon needed to see that NVL could handle the business before giving them a commitment. We won't know until someone writes a book.

This is all speculation on my part, but Amazon is pretty smart, and as smart as they are, they couldn't see how to make it work, even without re-inventing the wheel and partnering with (arguably) the people with the best chance of making it work.

Tom Wark's analysis seems spot on: the current state-based patchwork of wine regulations is a major impediment to anyone trying to centralize fulfillment. While some are optimistic that this won't hurt wineries, it certainly doesn't improve the situation for them either.

I am not optimistic about the likelihood of change, either. State governments want to make sure they get tax revenues from wine sales. Middlemen have existing businesses to protect. It seems unlikely to me that the Federal government would take action (Granholm v. Heald addressed the relevant Federal issue: states have to be consistent about the rules for in-state and out-of-state wineries). Certainly, they have other fish to fry in the short-to-mid term.

I hope that we'll hear more from Amazon about the reason for their decision. I'd love to hear from other people trying to solve the fulfillment problem (Copper Mountain, WTN, etc.) with their thoughts.

May 31, 2009

Someone gave left an anonymous comment to on one of my recent posts which alleged that the bank had padlocked the warehouse at New Vine Logistics (NVL) on Friday morning, May 29th.

I tried to contact NVL on Friday at about 4:30 PM Pacific to confirm the rumor. I did reach David Yewell, one of their two sales managers, who didn't have any information, having been out of the office on sales calls all day. I tweeted looking for another contact to confirm the rumor, without luck.

LarryTheWineGuy tweeted this morning (Sunday, May 31st) that NVL has suspended operations.

If this is true, there will be lots of repercussions. They are believed to be Amazon's partner for shipping and compliance, and have wine in inventory from a whole slew of wineries.

May 25, 2009

After a big flurry of activity last year, with a projected Fall launch, Amazon.com's wine program went strangely and completely silent (at least in the news -- I have confirmation from at least two sources that they are active behind the scenes).

Any one have information that they're willing or able to share? Leave an (anonymous) comment!

(take a look at the Amazon category to see everything I've posted on this topic)

September 24, 2008

Amazon Selects New Vine as its Compliance and Fulfillment Partner for the New Online Wine InitiativeGet Your Wine in Front of 60-Million Amazon Consumers Streamlined Set Up for New Vine Customers In the partnership, Amazon will provide front-end marketing services for wineries to list, promote and sell their brands, and New Vine will store, pack, and ship orders placed through Amazon's new online wine initiative. Like many of our customers, Amazon values New Vine because of its ability to provide an all-inclusive solution that will ensure the highest quality of fulfillment and compliant shipments.As a New Vine client with existing inventory and compliance arrangements, participation in the Amazon wine initiative will be streamlined. With minimal effort and commitment, you can add exposure to the millions of loyal Amazon consumers.Account Managers from Amazon are contacting wineries now to present the opportunity to list their unique wines on the new online site.If you would like more information on how to take advantage of the Amazon opportunity, please send inquiries to feedback@newvinelogistics.com or to Nate Glissmeyer (Amazon Services - Category Manager, Wine) at Nate@amazon.com.

I imagine Nate Glissmeyer is a pretty popular guy these days!

Additional coverage of the Amazon wine program and New Vine Logistics is available here.

September 22, 2008

New Vine Logistics, who will apparently be doing fulfillment for Amazon, claims that they can deliver wine in 45 states. Press reports have stated that Amazon will ship wine to 25 or 26 states. There are currently 15 states where direct shipment of wine is prohibited (Alabama, Arkansas, Delaware, Kentucky, Maine, Maryland, Massachusetts, Mississippi, Montana, New Jersey, Oklahoma, Pennsylvania, South Dakota, Tennessee, and Utah), plus one state (Kansas) where you must purchase the wine on-site. The Wine Institute has more details on each state's shipping laws.

My best guess is that Amazon will be shipping to the 26 states whose state laws were unaffected by the Supreme Court decision in Granholm vs. Heald, namely:

Alaska

California

Colorado

Georgia

Hawaii

Idaho

Illinois

Iowa

Louisiana

Minnesota

Missouri

Nebraska

Nevada

New Hampshire

New Mexico

North Carolina

North Dakota

Oregon

Rhode Island

South Carolina

Texas

Virginia

Washington

West Virginia

Wisconsin

Wyoming

This represents the last-likely-to-cause-problems approach, which makes good sense.

Of course, since Amazon has made no official announcement, and New Vine Logistics refers all questions to Amazon, this is (educated) speculation. It will be interesting to see where they roll out initially, and what happens over time as a result of Amazon's entry into the marketplace.

(Astute readers will notice that eight states -- Arizona, Connecticut, Florida, Indiana, Michigan, New York, Ohio, and Vermont -- are not part of the 15 + 1 + 26.)

September 12, 2008

As I've said before, everyone who sells wine online is going to have to step up their game to compete with Amazon's deep experience as an online wine retailer. For some wineries, it will be easier to just let Amazon do it, rather than to upgrade and maintain a substandard e-commerce architecture.

September 11, 2008

According to Reuters (and confirmed by Steve Heimoff), Napa Valley Vinters (NVV) is now holding introductory meetings for Napa-based wineries to meet with Amazon.com regarding the requirements for selling their wines through Amazon. In other areas, Amazon is meeting directly with wineries, but the large number of Napa-based wineries seems to be the motivation for group meetings (also as a way for NVV members to get value from their membership fees).

Note that this coverage is based on a press release from NVV, not an official annoucement by Amazon.

Now in our seventh decade, the Napa Valley Vintners (NVV) non-profit trade association is the sole organization responsible for promoting and protecting the Napa Valley Appellation as a winegrowing region second to none in the world. Respect for our history reinforces our commitment to the preservation and enhancement of the Valley's land, wine, and community for future generations. We address the shared interests of more than 310 member wineries and aspire to be the essential organization for all Napa Valley vintners.

UPDATE: New Vine Logistics aquired their initial fulfillment infrastructure from the failure of WineShopper.com, which had previously received a $30 million investment from Amazon.com. In other words, wine has been on Amazon's mind for a long time, and there is a previous relationship between Amazon and NVL.

August 11, 2008

Jeff Stai (El Jefe) of Twisted Oak met with Amazon representatives last Thursday, and here is his report (left as a comment on a previous Amazon-related post):

OK, so I am reporting back Sunday (just back from a very successful two-day tasting event with the TAPAS organization.)

Pretty much everything has been covered by other comments in the several posts on this. They are going for smaller wineries, and the wines will sell for a minimum of $12. The winery commits to selling the wine, Amazon comes and picks up the wine and deals with everything else - including compliance paperwork, shipping problems, etc.

Fans of the Amazon Prime program will be pleased to know that Prime will also apply to wine shipping - and only a two-bottle minumum order! [Yippee! - Editor]

It won't be 45 states but rather 27 states in the initial rollout. One possible barrier to entry for some wineries is that the winery must pay all regulatory fees for label registration in those 27 states (Amazon estimates that to be about $400 per label.) That is a startup cost and the yearly renewals will be less. Amazon does the paperwork. Note also that if a winery is already registered in a state, another registration must be done since it is a new 3-tier path. And, a winery must commit to all states that Amazon will ship to - you can't pick and choose states.

Thanks, Jeff. You're the best. One question: How do wineries who want to participate in this program get in touch with Amazon? Or is it "Don't call us, we'll call you?"

August 05, 2008

Are wine retailers worried about Amazon's foray into wine? Personally, I
am not, but I would love to hear the opinions of others. From my point of view,
our value proposition is so vastly different from that of Amazon that I do not
view them as competition at all.

Although my original post focused on the impact of Amazon on wineries, it will be interesting to see how retailers (online and offline) are affected as well. Since all 2006 Acme Winery Chardonnay is the same thing (allowing for storage and transportation issues), will people still buy from the winery or a retailer if they can get it cheaper on Amazon? Obviously, wines not available at Amazon will be a different matter.

In the Amazon program (as currently understood), wineries set their price and Amazon pays them 50% of that amount per sale. So, the winery has control of the price that Amazon charges. Will wineries discount in order to get volume via Amazon?

For retailers, it will be an issue of service and convenience. Shoppers have shown that they will cheerfully migrate to online ordering when retailers don't provide value (in terms of service, convenience, or experience) for the price they charge. Their one clear advantage is being able to taste wines at retail.

It appears that Amazon is willing to take relatively small quantities of wine (at least at the outset), allowing smaller producers to participate. For savvy consumers, Amazon will have to demonstrate that they take good care of the wines.

Regardless, since Amazon e-commerce is so familiar and easy, wineries and retailers will have to step up their e-commerce game to compete.

(Note that Amazon recently rolled out Checkout by Amazon and Amazon Simple Pay, both of which are explained on the Amazon Payments site, and both of which are worth a look to see if either makes sense to incorporate in your existing winery e-commerce system.)

Three-tier fulfillment, a la New Vine Logistics (NVL), not distribution line Wine.com.

Free two-day shipping with Amazon Prime (maybe). If so, it points to an internal solution for fulfillment, as opposed to outsourcing to someone like NVL.

The Amazon wine buyers may become as powerful as those at Costco, America's largest wine retailer. Not clear how Amazon will deal with smaller producers with limited supplies of a given vintage. Or how smaller producers will deal with Amazon (since a small winery really needs to sell direct as much as possible).

Without much fanfare, Amazon has begun selling wine as part of their "Amazon Fresh" program which delivers groceries to your door (presently only available in "a limited number of Seattle neighborhoods").

AmazonFresh offers beer and wine for attended home delivery. You must be present to take delivery of the beer and wine. If you appear that you might be 35 years old or younger, we will not deliver without a valid picture identification, such as a Driver's License, Passport or Military ID. We will also not deliver beer or wine if you appear intoxicated.

Currently they show 532 wines and sherries and 20 sparklers, ranging from a $4.11 bottle of Ernest & Julio Gallo Twin Valley White Zinfandel to a $179.99 bottle of 2002 Tattinger Comtes de Champange Rose.

Of course, they're not selling wine online to customers nationwide, but it's an interesting development in the online wine space. Amazon invested $30 million in wineshopper.com back in April, 2000. A few months later (August 2000), Wineshopper merged with Wine.com as the dot-com bubble burst.

What would you do differently if your winery's wines were available at Amazon.com?